American Association of State Colleges and Universities
A Higher Education Policy Brief • April 2010
“Maintenance of Effort”
An Evolving Federal-State
Policy Approach to Ensuring
College Affordability
Contributing:
F. King Alexander, President, California State
University Long Beach
Thomas Harnisch, Research Associate, AASCU
Daniel Hurley, Director, State Relations
and Policy Analysis, AASCU
Robert Moran, Director, Federal Relations
and Policy Analysis, AASCU
Context
to maintain specified minimum funding levels for
Congress has recently focused on the complex
public higher education in order to dissuade states
relationship between federal student aid, states’
from substantially reducing their appropriation
funding appropriations for higher education, and
commitments. In establishing these “maintenance of
institutional tuition and fee levels. Fueling this focus
effort” provisions that determine minimum funding
is the ongoing cost shift in public higher education,
thresholds states must meet in order to receive
from states to students and families, as well as to
specified federal funds, Congress intended for these
the federal government via student aid programs.
federal monies to supplement state resources aimed
This shift in who pays for education is primarily
at supporting institutions and students, not supplant
a consequence of gradual state disinvestment in
states’ fiscal commitments to higher education.
public higher education. As a result, college officials
have compensated for the loss of state dollars with
An analysis of state applications for the American
a combination of cost-cutting measures, reductions
Recovery and Reinvestment Act (ARRA) of 2009
in student enrollment, and an increased reliance on
reveals that its maintenance of effort provision
student tuition and fee revenues.
appears to have successfully limited the amount of
disinvestment in higher education during the current
The shift in higher education funding, from states to
recession. This suggests that federal incentives and
students—driven by insufficient, and in many cases,
disincentives can help assure that states maintain
sharply reduced state appropriations for higher
adequate financial support to public colleges
education—has placed more pressure on federal
and universities, and in so doing, can contribute
lawmakers to expand existing student aid programs.
to college affordability. This brief explores the
Increased federal investment in student aid has
arguments for and against such “maintenance of
helped negate the impact of rising tuition and fees.
effort” provisions. It also explores the relationships
The trend in states’ disinvestment in public higher
and responsibilities of the federal government and
education is especially problematic considering the
state legislatures in providing affordable higher
burgeoning student enrollments occurring in many
education access, and discusses the prospects for
states. As a result, recent federal legislation has
the continued use of this federal-state accountability
included financial incentives for state lawmakers
measure.
Maintenance of Effort—A New
Public Higher Education Funding
Paradigm
Months later, Representatives Miller and Tierney,
An emerging policy solution to counter states’
affecting state appropriations for higher education.
funding cuts to their public higher education
The provision was included in the newly created
systems is the inclusion of “maintenance of effort”
College Access Challenge Grant Program contained
(MOE) provisions in federal legislation. These
in the Higher Education Opportunity Act of 2008
provisions stipulate that the federal government
(HEOA), H.R. 4137—the most recent reauthorization
will offer states a financial incentive in exchange
of the Higher Education Act of 1965.
with support from lawmakers in both chambers,
pushed through passage of the first MOE legislation
for their “maintenance” of a prescribed level of
funding “effort.” This reflects a changing dynamic
Precedent
in higher education finance, given that the federal
The inclusion of MOE provisions in federal legislation
government has not traditionally been involved
is not a new phenomenon. However, their fairly
in efforts to make college affordable, aside from
recent introduction into state postsecondary
funding federal student aid programs. The use of
education is noteworthy. Prior to the HEA
MOE provisions to protect state appropriations
reauthorization in 2008, the only existing federal-
to higher education also establishes federal
state funding partnership for postsecondary
expectations of states similar to those formed
education was the Leveraging Education Assistance
in 1965 with the passage of the Elementary and
Partnership (LEAP), a $64 million annually-funded
Secondary Education Act (ESEA); this has proven
program initially designed to encourage states to
effective in preventing many states from supplanting
develop state student financial aid programs. When
state funding commitments to elementary and
first developed in 1972, the program was known as
secondary education.
the State Student Incentive Grant Program (SSIG)
and was intensely lobbied for by private higher
The rationale behind the higher education
education institutions as a means to create state
MOE provision was first advanced in 2007 in
funding streams to all institutions regardless of their
testimony by F. King Alexander to the U.S. House
public or private status. Prior to the development
of Representatives’ Committee on Education and
of the SSIG, about half of the states had developed
Labor, supported by the American Association of
student aid programs and many maintained strong
State Colleges and Universities (AASCU). During
constitutional restrictions on the use of the public
the proceedings, two federal lawmakers, Rep.
funds by private institutions.
George Miller (D-CA) and Rep. John Tierney (D-MA),
promoted the idea that the federal government
When the program was first authorized in 1972,
could leverage its higher education spending
28 states had undergraduate need-based grant
commitments to incentivize state legislative
programs. By 1976, 39 states had developed
decisions affecting public colleges and universities,
such programs. By establishing federal incentives
which enroll nearly 75 percent of all students and
through the use of matching funds, the federal
play a critical role in U.S. economic competitiveness.
government reshaped state legislative thinking to
In so doing, the Congressmen argued, such
allow state monies to flow to both private and public
incentives would help ensure that federal monies
institutions through state student aid programs.
were used to supplement state resources for public
Need-based state student grant aid programs now
higher education, not supplant them. The intent
exist in all but one state. It is notable that many
of the MOE measure was to ensure that state
of these programs today disproportionately aid
legislators did not subvert college access by making
private-sector and high-priced institutions because
corresponding reductions or insufficient increases in
they tend to award more aid to students attending
state appropriations to higher education.
more costly institutions. As a result, less costly
April 2010 • AASCU Policy Matters \ 2
in their ability to maintain their access-oriented
Maintenance of Effort and
Postsecondary Education
missions. Currently, the state-matching requirement
As mentioned earlier, a broader version of MOE
has long since been surpassed and the Obama
was formally introduced into federal postsecondary
administration has called for the program to be
education legislation in the Higher Education
discontinued.
Opportunity Act of 2008 (HEOA). The legislation
public colleges and universities are disadvantaged
included a provision that authorized funds to states
Other major pieces of federal legislation utilize
for a College Access Challenge Grant Program.
different MOE provisions. These include the
The program is designed to foster partnerships
Elementary and Secondary Education Act of 1965
to increase low-income students’ enrollment in
(ESEA)—reauthorized in 2001 as the No Child
college. To be eligible for these federal matching
Left Behind Act (NCLB)—the Individuals with
grants, states are required to maintain their higher
Disabilities Act (IDEA) and welfare benefits under
education funding effort at a level no less than the
the Temporary Assistance to Need Families (TANF)
average amount appropriated during the previous
program.
five years. To date, every state has received a grant.
The program was initiated with a total annual federal
MOE provisions in the ESEA, previously mentioned,
appropriation of $66 million, equal to approximately
have a proven record of serving as an effective
one-tenth of one percent of total state and local
means of preventing state use of federal funds
spending on public higher education operating
to supplant K-12 educational support. The MOE
support. This amount was arguably insufficient
provisions included in ESEA place a requirement
to influence state lawmakers’ funding decisions
on both the state and the local school systems to
affecting public higher education. However, with the
maintain a funding level no less than 90 percent of
recent passage of the Health Care and Education
either total aggregate spending on public education
Reconciliation Act (H.R. 4872), the College Access
or the amount expended per pupil for the previous
Challenge Grant Program was expanded to $150
year. If these levels are not maintained, federal
million annually over the next five years, for a total
funds are reduced proportionate to the cuts. While
investment of $750 million.
legislative language exists allowing states to appeal
for a waiver, the U.S. secretary of education has very
Another MOE provision with significant impact on
little authority to grant a waiver. Numerous federal
both K-12 and higher education was included in
court cases contesting states’ attempts to use
the American Recovery and Reinvestment Act of
federal ESEA Title I funds to supplant existing state
2009 (ARRA), which contained nearly $40 billion
funding have resulted in the courts consistently
in State Fiscal Stabilization Funds (SFSF) to help
ruling in favor of the federal government’s right to
states shore up their elementary, secondary and
require MOE provisions. Due to these provisions,
postsecondary education budgets. The legislation
states have been historically reluctant to reduce
requires states to use the SFSF monies to minimally
funding for K-12 programs and have instead targeted
fund K-12 and higher education at their 2006
other education programs.
appropriated levels for fiscal years 2009, 2010 and
2011. In the Jobs for Main Street Act (H.R. 2847),
IDEA includes a more restrictive MOE provision.
passed by the U.S. House of Representatives in
States may not reduce the amount of money
December 2009, states would only be eligible for
supporting education for children with disabilities
additional K-12 and higher education funds if they
below the amount provided during the preceding
maintained FY 2009 levels for total state spending
fiscal year (with certain exceptions). The TANF
in those education sectors. Congressman George
block-grant program, on the other hand, requires
Miller (D-CA) has introduced the Local Jobs for
states to spend at a level equal to 75 percent of their
America Act (H.R. 4812), which contains a similar
1994 contribution to the program, or 80 percent if
provision. It is anticipated the Senate will take
they fail to meet worker-participation rates.
up similar legislation later in the spring of 2010
April 2010 • AASCU Policy Matters \ 3
also including MOE language. Clearly, Congress is
global competitiveness. Recognizing the importance
becoming increasingly concerned about federal
of human capital to the nation’s economic security,
funds supplanting state funding, rather than
President Barack Obama has made increasing
supplementing it.
educational attainment rates among the nation’s
citizens a top domestic policy priority. Major
However, not all stakeholders in the higher
initiatives underway by the Bill and Melinda
education and state governance communities
Gates Foundation and Lumina Foundation for
agree with many federal lawmakers’ point of view.
Education underscore the necessity of increasing
The primary arguments both for and against MOE
the nation’s output of citizens equipped with
language are outlined below.
postsecondary credentials. Higher education-related
MOE provisions serve as a means for the federal
Arguments for the Inclusion of
Federal Maintenance of Effort
Provisions Affecting Higher
Education State Support
government to assist and encourage states in their
Substantive arguments support including MOE
Maintaining State Funding Responsibilities: In
provisions in federal higher education legislation
recent years, numerous federal hearings and
to ensure college access and affordability. An
discussions focused on ways to monitor or control
overarching theme is the need to prevent further
public college and university tuition and fee
erosion in states’ ability to develop a high-skill, high-
increases. However, little consideration was given
knowledge workforce critical to national economic
to the primary reason for these increases: state
competitiveness. Many stakeholder groups in
appropriations have not kept pace with increases in
higher education, among them public college and
postsecondary enrollment and in many cases, have
university presidents and student groups, have
been sharply reduced. In calling for the inclusion of
supported MOE provisions. Primary rationales for
the MOE provision in the HEOA, numerous members
including them in federal legislation are that they:
of the U.S. House of Representatives Education and
efforts to build labor market capacity necessary to
compete internationally.
Labor Committee were concerned that pouring
• Enable the federal government to pursue on a
billions of dollars of new investment into federal
sustained basis national educational attainment
student aid would ultimately not have its intended
and workforce priorities that it in part funds;
effect in expanding educational access if state
• Leverage federal resources to incentivize states to
maintain their funding responsibilities for public
legislatures continued to cut financial support for
their higher education systems.
higher education;
• Can help mitigate rising tuition prices by
Mitigating Rising Tuition Prices: States’ collective
encouraging states to invest adequately in their
investment in each full-time enrolled student
public higher education systems;
declined by $1,000 between fiscal years 2000 and
• Provide a more predictable funding framework for
2009, according to the State Higher Education
state colleges and universities, thus diminishing
Executive Officers (SHEEO) organization. Much
the fluctuation in state funding for higher
of this disinvestment has been made up through
education that has long been associated with the
increases in tuition and fees, often paid for by
ebb and flow of economic cycles; and
student loans. This leads to concerns over growing
• Respect state and institutional sovereignty by
debt burdens faced by citizens.
providing financial incentives, but not legal
mandates or tuition control.
The MOE provisions are based on the fact that a
significant factor contributing to the rapidly rising
Meeting National Educational Attainment Goals:
cost of college has been the continual erosion in
Access to an affordable, high-quality college
most state governments’ commitment to maintain
education is not simply a state concern, but a
levels of public funding necessary to educate
national priority with implications for America’s
growing enrollments. State funding is critical to
April 2010 • AASCU Policy Matters \ 4
and tuition prices (see Figure 1). Large cuts in state
Arguments Against Federal
Maintenance of Effort Provisions
Affecting Higher Education State
Support
support often result in big jumps in tuition prices.
MOE provisions have been met with criticism from
ensuring college affordability, as illustrated by data
showing a relatively direct inverse relationship
between changes in levels of state appropriations
groups representing state lawmakers and governors,
Enhancing Higher Education Funding Stability
such as the National Governors Association (NGA)
and Predictability: Another benefit of the MOE
and the National Conference of State Legislatures
provisions are that they lend greater predictability
(NCSL). Objections to the MOE provisions include:
to higher education funding. As evidenced in Figure
1, state appropriations vary greatly from year to year,
• Undermining by the federal government of
complicating system and institutional budgeting
state policymakers’ control over state and local
and strategic planning efforts. Clearer state funding
priorities, given already existing requirements to
Figure 1. Annual Percentage Changes in State Tax Appropriations
for Higher Education per Public Full-Time Equivalent (FTE) Student
and in Tuition and Fees at Public Four-Year Institutions
in Constant 2008 Dollars, 1978-1979 to 2008-2009.
fund certain program areas
(such as Medicaid);
• Reluctance by state officials
to substantially increase
funding for higher education
due to ensuing commitments
to provide funding at higher
future thresholds, as is
required by current MOE
provisions;
• A potential increase in
fiscal inequities among
states, given that those in
stronger fiscal circumstances
may be better positioned
Source: The College Board, Trends in College Pricing, 2009.
to meet MOE commitments
during economic downturns,
expectations are a prerequisite for improving long-
while the potential loss of federal funds resulting
term fiscal planning capabilities involving such
from the inability to meet MOE provisions may
activities as academic program development,
exacerbate budgetary constraints faced by less
enrollment planning, capital construction and tuition
prosperous states; and
setting.
• State lawmakers’ objection to federal intrusion
Ensuring State Independence on Higher Education
into education policy, a power not specifically
Policy: Finally, federal MOE language only calls for
delineated to the federal government in the
sustained financial investments by the states in
Constitution.
public higher education; it does not overreach into
other policy issues within the postsecondary sector.
Undermining of State and Local Priorities: Some
MOE provisions seek to ensure that states provide
fear that MOE provisions will be inappropriately
sufficient levels of appropriations as to minimize
used to influence state decisions on public policy
tuition increases; they do not seek to specifically
matters beyond the scope of higher education
control tuition prices or otherwise impinge upon
and intrude on the legitimacy and role of elected
the authority of institutional or system governing
governors and state legislatures. The amount of
boards.
money involved in federal initiatives, some argue,
April 2010 • AASCU Policy Matters \ 5
will lead to the federal government having too much
education may receive greater appropriations. Thus
influence over a broad set of policy issues. Others
the organizations theorize that state officials may be
suggest that the federal MOE provision does not
unwilling to appropriate large increases in spending
account for the diverse economic, social, geographic
for MOE-related expenditures because they will
and political priorities of states and communities.
have a higher threshold to maintain in future years.
With so much funding at stake, the provision could
They also suggest that state lawmakers may be
give incentives to states to alter their funding
more reluctant to make key investments in capital
agendas to fit a “one size fits all” mold and thereby
and research and development projects related to
risk ignoring legitimate state and local needs to
higher education, which are not included in MOE
meet an arbitrary funding threshold.
calculations.
Others have asserted that MOE provisions may
Lack of Consideration for Economic Inequalities
make greater proportions of state budgets “de-
among States: The relative wealth, economic
facto” mandatory spending, further complicating
strength and overall capacity to fund major
state legislatures’ budget-setting responsibilities
investments such as public higher education
and hindering discretionary use of limited fiscal
varies greatly from state to state, thus placing
resources. The NGA estimates that combined with
less prosperous states at a disadvantage when it
federally mandated Medicaid expenditures, the
comes to meeting federal MOE obligations, argue
higher education MOE requirement in the HEOA will
some. While waiver opportunities exist for states
result in the federal government dictating spending
to seek an exemption from MOE requirements
for one-third of all state revenues.
based on severe economic or fiscal circumstances,
the provision language does not recognize states’
Counterproductive to State Higher Education
relative ability to react to changing economic
Funding: The NGA and NCSL also maintain that
conditions and budgetary circumstances, and thus
including MOE language in federal legislation may
the capacity to meet higher education funding
be counterproductive for state higher education
obligations.
funding. During periods of economic scarcity,
discretionary budget items like higher education
Growing Federal Influence over a State
usually face budget reductions while states seek
Responsibility: Finally, states have historically taken
to protect Medicaid and K-12 education. However,
the lead in providing access to public education,
during periods of economic prosperity, higher
given that the U.S. Constitution does not specifically
Table 1. States Applying for Federal Higher Education
Maintenance of Effort Waivers Pertaining to the
American Recovery and Reinvestment Act of 2009.
FY 09
FY 10
Alabama
X
Colorado
X
Florida
X
Idaho
Iowa
X
Kentucky
X
Louisiana
X
Massachusetts
X
Nevada
X
New Jersey
X
Puerto Rico
X
Rhode Island
X
X
South Carolina
X
X
FY 11
articulate the federal government’s role in doing
so. While substantial sums of federal monies
are provided to states to fund improvements
in K-12 student achievement and to facilitate
college access, direct operating support for
both secondary and postsecondary education is
X
X
X
the responsibility of the states. The inclusion of
federal MOE provisions, some say, represents an
infringement on states’ longstanding oversight
responsibility for their K-12 and public higher
education systems.
X
X
X
X
X
Enforcement of Maintenance
of Effort Provisions
As previously discussed, MOE provisions usually
include “waiver” clauses for states in difficult
financial situations. However, if federal officials
Source: U.S. Department of Education, 2010.
constantly permit waivers, the strength of the
April 2010 • AASCU Policy Matters \ 6
provision will be greatly diminished. Both HEOA and
ARRA included waivers for the MOE provision.
Does Maintenance of Effort
Influence State Appropriations?
The extent of the federal “incentive” associated with
Under guidance on the ARRA, issued by the U.S.
a MOE provision—typically in the form of eligibility
Department of Education, states are eligible for
for federal monies or matching grants—is a critical
waivers if they fund elementary and secondary
factor in determining the effectiveness of MOE. The
education, for the fiscal year under consideration,
MOE provision in HEOA carried a very small financial
at the percentage of total state revenues available
inducement; and as a corollary, the incentive to keep
to the state that is equal to or greater than the
state funding above a prescribed threshold was
percentage provided for that purpose in the
likewise very small.
preceding fiscal year. In sum, states must maintain
the same proportion of their budget that is devoted
Data suggests that the MOE provision in the ARRA
to K-12 education, regardless of state budget
influenced a critical mass of state governments in
circumstances, to be eligible for waivers. The U.S.
their postsecondary education budget decisions. An
secretary of education may grant waivers for
analysis of the data from Phase II ARRA applications
“exceptional or uncontrollable circumstances.” A
reveals that MOE, not state formulaic priorities or
number of states have slipped below the fiscal year
educational principles, was the overriding factor in
2006 funding threshold and have asked for waivers
many state decisions in determining funding levels
(see Table 1). The department has published a list of
for higher education (see Table 2). Nine states
states that have requested waivers, and as of April
reduced their funding for higher education in fiscal
15, 2010, no waivers had been granted. The level of
year 2010 to within one percent of their fiscal year
enforcement by the Obama administration on MOE
2006 federal MOE threshold. Three states—Arizona,
remains unclear.
Colorado and Kansas—set their higher education
budgets at exactly the minimum threshold.
Table 2. State Appropriations for Higher Education in Relation to the “Maintenance of Effort”
Threshold Contained in the ARRA State Fiscal Stabilization Fund, Select States,
Fiscal Year 2006 and Fiscal Year 2010
FY 2006
FY 2010
Difference
Percent Difference
$ 987,239,500 $987,239,500 —0—
0.00%
California
$8,857,000,000 $8,861,000,000 Colorado
$555,289,004 $555,289,004 $61,266,493 $62,070,000 $803,507 1.31%
$292,953,000 $295,866,100 $2,913,100 0.99%
$1,604,852,068 $1,605,024,500 $172,432 0.01%
$747,064,138 $747,064,138 Michigan
$1,670,532,950 Montana
Arizona
District of Columbia
Idaho
Illinois
Kansas
$4,000,000 0.05%
—0—
0.00%
—0—
0.00%
$1,677,816,822 $ 7,283,872 0.44%
$131,297,110 $132,762,756 $1,465,646 1.12%
Tennessee
$1,110,882,966 $1,112,842,200 $1,959,234 0.18%
Washington
$1,313,609,000 $1,319,556,000 $5,947,000 0.45%
Source: U.S. Department of Education, ARRA Phase II State Applications
April 2010 • AASCU Policy Matters \ 7
Conclusion
The inclusion of MOE provisions in federal higher
education legislation is a policy measure aimed at
assuring a compact of shared responsibility between
the federal and state governments to enhance
college affordability. Evidence based on states’
recent higher education budget determinations, as
influenced by the MOE provisions contained in the
ARRA legislation, indicate that these provisions can
serve as an effective federal policy tool in ensuring
states’ commitment to funding higher education.
More specifically, in the case of the ARRA, evidence
shows that MOE requirements prevented many
states from reducing financial support for public
higher education even further. This helped prevent
greater student tuition and fee increases at the
nation’s public colleges and universities.
In the continual effort to support access to
affordable and high-quality public postsecondary
education, AASCU promotes the inclusion of
effective and targeted MOE provisions in all future
relevant federal higher education legislation.
Providing affordable access to quality public
higher education should be a shared responsibility
of the federal government, state legislatures and
public postsecondary institutions. Including MOE
provisions in future federal higher education
funding legislation is one important step in ensuring
that states uphold their financial responsibilities
to students and families, as well as contribute to
national economic competitiveness.
Resources
Alexander, F. King. “Make ‘Maintenance of Effort’
Permanent” Inside Higher Ed (January 28, 2010).
Alexander, F. King. “Ensuring That States Support Higher
Ed” Inside Higher Ed (July, 18,
2008).
Alexander, F. King. Barriers to Equal Educational
Opportunity: Addressing the Rising Cost of a College
Education Testimony to the House Committee on
Education and Labor, U.S. House of Representatives
(November 1, 2007).
American Association of State Colleges and Universities.
AASCU Resource Repository Regarding American
Recovery and Reinvestment Act (2009).
Inside Higher Ed. “Maintain State Spending. Or Else” (April
28, 2008).
National Conference of State Legislatures. Maintenance of
Effort and Higher Education Spending (2008).
National Conference of State Legislators. Federal Mandate
on State Higher Education Spending Would Hurt MostNeedy Students (2008).
National Governors Association. Letter to Secretary
Margaret Spellings on “Maintenance of Effort in the
Higher Education Opportunity Act (2008).
National Governors Association. Letter to Senate
leadership on the proposed “Maintenance of Effort”
mandate in the College Opportunity and Affordability
Act (2008).
National Governors Association. Letter to House
leadership on provisions in the College Opportunity and
Affordability Act (2007).
National Governors Association. Higher Education,
Mandates and Unintended Consequences: An Analysis
of MOE Mandate in HR 4137 (2007).
National Governors Association. Memo to Congressional
staff on the Maintenance of Effort (MOE) mandate in
College Opportunity and Affordability Act (2007).
National Governors Association. Governors’ Views on
House HEA Maintenance of Effort Mandates. (2007).
The Christian Science Monitor. “States Balk at Higher-Ed
Mandate” (2008).
The Chronicle of Higher Education. “Should Congress
Demand More State Support for Higher Education?”
(2008)
The Chronicle of Higher Education. “New Rule on
Spending by States Lacks Teeth” (2009).
The Higher Ed Watch Blog—New America Foundation. A
Maintained Effort (2008).
U.S. Department of Education. Guidance on the
Maintenance-of-Effort Requirements in the State Fiscal
Stabilization Fund Program (January 2010).
U.S. Department of Education. American Recovery and
Reinvestment Act of 2009: Potential Consequences
of the Maintenance of Effort Requirements under the
American Recovery and Reinvestment Act State Fiscal
Stabilization Fund (September 2009).
Contact:
Daniel J. Hurley, Director of State Relations and Policy Analysis
Thomas Harnisch, Research Associate
Robert Moran, Director, Federal Relations and Policy Analysis
www.congressweb.com/aascu • 202-293-7070